Old regime or new? Decide with your own numbers
The new regime has lower rates and almost no deductions; the old has higher rates and many. Which wins depends entirely on what you actually claim.
India runs two parallel income tax systems and lets you choose between them each year. The new regime is the default. Most people pick one because a colleague did, which is an expensive way to decide.
The trade is straightforward. The new regime gives you lower slab rates but takes away nearly every deduction. The old regime charges more but lets you subtract a great deal first.
The slabs
New regime, for the current financial year:
| Taxable income | Rate | | --- | --- | | Up to ₹4,00,000 | Nil | | ₹4,00,001 – ₹8,00,000 | 5% | | ₹8,00,001 – ₹12,00,000 | 10% | | ₹12,00,001 – ₹16,00,000 | 15% | | ₹16,00,001 – ₹20,00,000 | 20% | | ₹20,00,001 – ₹24,00,000 | 25% | | Above ₹24,00,000 | 30% |
Old regime, for an individual below 60:
| Taxable income | Rate | | --- | --- | | Up to ₹2,50,000 | Nil | | ₹2,50,001 – ₹5,00,000 | 5% | | ₹5,00,001 – ₹10,00,000 | 20% | | Above ₹10,00,000 | 30% |
Notice how quickly the old regime reaches 30%. That is why deductions matter so much there — and it is also why the old regime can still win despite the harsher rates.
Health and education cess of 4% applies on top in both cases.
The ₹12 lakh headline, explained properly
Under the new regime, a rebate under section 87A of up to ₹60,000 means taxable income up to ₹12,00,000 attracts no tax at all. Add the ₹75,000 standard deduction available to salaried people and a gross salary of ₹12,75,000 can come out entirely tax-free.
This is genuinely significant, and it is also where a subtlety lives. Without further provision, earning one rupee above the threshold would trigger the full slab tax — roughly ₹60,000 of tax for ₹1 of extra income. The law prevents that cliff through marginal relief: just above the threshold, your tax is capped at the amount by which your income exceeds ₹12,00,000.
At a taxable income of ₹12,10,000, you pay tax on the ₹10,000 of excess rather than the ₹61,500 the slabs alone would produce. The cliff becomes a ramp. Any calculator that ignores this will badly mislead anyone earning just over the line.
Under the old regime, the equivalent rebate is much smaller: ₹12,500, available only up to a taxable income of ₹5,00,000.
What the old regime still lets you claim
- Section 80C — up to ₹1,50,000. ELSS funds, EPF, PPF, life insurance premium, home loan principal, children's tuition fees. These all share one ceiling.
- Section 80CCD(1B) — up to ₹50,000. An additional NPS deduction that does not consume your 80C limit.
- Section 80D — up to ₹25,000 for health insurance premiums, with a further allowance for insuring parents.
- HRA exemption, which for someone paying significant rent in a metro can be the largest item on this list.
- Home loan interest under section 24(b).
The new regime keeps the ₹75,000 standard deduction and the employer's NPS contribution, and takes essentially everything else away.
Where the crossover falls
There is no universal answer, but the shape of it is consistent: the more you genuinely claim, the more the old regime favours you.
Someone earning ₹15,00,000 who claims nothing is clearly better off under the new regime. The same person paying substantial metro rent, with a full 80C, NPS, and health cover, can find the old regime cheaper. Rent is usually the deciding factor, because HRA is the one large deduction that is not also an investment lock-in.
Two warnings before you optimise:
Do not buy products purely to save tax. A ULIP or endowment policy bought each March to fill 80C will typically cost you more in poor returns and charges than it ever saved in tax. If you would not own it otherwise, it is not a deduction — it is a purchase with a discount attached.
Salaried employees may switch each year. Your choice is not permanent, so it is worth recalculating whenever your rent, loan or investment pattern changes materially.
Before you act on any of this
WealthSense publishes financial education, not financial advice. We are not a SEBI-registered investment adviser and nothing here is a recommendation to buy or sell any security. Every calculator uses an assumed rate of return that is illustrative only — real returns vary and can be negative. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Tax figures follow published slabs for the current financial year and ignore surcharge and individual circumstances. Please consult a qualified adviser before making decisions with your money.